Introduction
The concept of certainty of objects is a cornerstone of the law of express trusts in England and Wales, ensuring that trustees can identify the beneficiaries for whom the trust property is held. Without such certainty, a trust may fail, rendering it unenforceable. Historically, the test for certainty of objects has evolved, culminating in the modern ‘is or is not’ test established in McPhail v Doulton [1971] AC 424. This essay examines whether this test strikes an appropriate balance between doctrinal clarity—ensuring legal principles are precise and predictable—and practical flexibility, allowing trusts to adapt to varied and often complex factual scenarios. By exploring the historical context, the implications of the modern test, and its practical application, this essay argues that while the ‘is or is not’ test offers greater flexibility compared to earlier approaches, it sacrifices some doctrinal clarity, creating challenges for trustees and courts alike. The discussion will critically evaluate this balance, drawing on key case law and academic commentary to assess whether the test meets the needs of contemporary trust law.
Historical Context: From List Certainty to the Modern Test
To appreciate the significance of the ‘is or is not’ test, it is essential to trace the evolution of certainty of objects in trust law. Prior to McPhail v Doulton, the prevailing standard for discretionary trusts was the ‘list certainty’ test, as articulated in IRC v Broadway Cottages Trust [1955] Ch 20. This test required trustees to compile a complete list of all possible beneficiaries, ensuring absolute certainty in identifying the class of objects. While this approach provided doctrinal clarity by setting a rigid standard, it was often impractical, particularly for trusts with large or fluctuating classes of beneficiaries, such as “all employees and their dependants.” The strictness of the test frequently led to trusts being declared invalid due to administrative infeasibility (Emery, 1982).
The shift to the ‘is or is not’ test in McPhail v Doulton marked a significant departure from this rigidity. The House of Lords, led by Lord Wilberforce, held that for discretionary trusts, it was sufficient to establish whether any given individual could be said to be within or outside the class of beneficiaries. This test aligned the certainty requirement for discretionary trusts with that of powers of appointment, prioritising conceptual certainty over the need for a definitive list. Arguably, this change introduced greater practical flexibility, as trustees were no longer burdened with an impossible task in expansive trusts. However, as will be discussed, this flexibility came at the expense of some predictability in legal outcomes.
Doctrinal Clarity Under the ‘Is or Is Not’ Test
Doctrinal clarity is a fundamental principle in law, ensuring that rules are precise and consistently applied. The ‘is or is not’ test, while conceptually straightforward, has been criticised for lacking the precision of its predecessor. Unlike the list certainty test, which provided a clear benchmark (i.e., the ability to compile a complete list), the modern test relies on a more abstract notion of conceptual certainty. For instance, in McPhail v Doulton, Lord Wilberforce acknowledged that the test does not require trustees to know every possible beneficiary but rather to ascertain whether a person falls within the defined class. This shift, while pragmatic, introduces ambiguity in cases where the class definition is vague or subjective, such as “friends” or “deserving causes.”
Academic commentators have noted that this lack of clarity can complicate the trustee’s role. Hayton (2012) argues that the test, while less stringent, places a significant interpretive burden on courts to determine the boundaries of a class, often resulting in inconsistent judicial outcomes. For example, in Re Baden’s Deed Trusts (No. 2) [1973] Ch 9, the Court of Appeal grappled with the term “dependants,” illustrating how the test’s reliance on conceptual certainty can lead to disputes over meaning. Thus, while the test avoids the impracticality of list certainty, it arguably undermines doctrinal clarity by introducing a degree of subjectivity into judicial decision-making.
Practical Flexibility and Its Benefits
Despite these concerns, the ‘is or is not’ test undeniably offers practical flexibility, a critical consideration in modern trust law. Trusts are often created for diverse purposes, ranging from family wealth management to charitable initiatives, and the law must accommodate this variety. By moving away from the requirement of a complete list, the test enables the creation of discretionary trusts with broader and more inclusive classes of beneficiaries. This flexibility was evident in McPhail v Doulton itself, where a trust for “employees, ex-employees, and their dependants” was upheld despite the impossibility of compiling a definitive list (Hudson, 2015).
Furthermore, the test allows courts to uphold the settlor’s intentions in circumstances where a stricter approach would render the trust void. This is particularly important in an era where trusts are increasingly used for complex social and economic purposes. As Penner (2016) suggests, the relaxation of certainty requirements reflects a broader policy goal of facilitating private wealth distribution without undue legal obstacles. Indeed, the ability to adapt to varied factual scenarios—whether through judicial interpretation of ambiguous terms or pragmatic application of the test—demonstrates a responsiveness that the list certainty test lacked. Therefore, in terms of practical utility, the modern test has generally been viewed as a positive development.
Balancing Act: Challenges and Limitations
While the ‘is or is not’ test offers flexibility, it is not without challenges. One key issue is the potential for increased litigation, as the test’s reliance on conceptual certainty often requires judicial intervention to resolve ambiguities. This not only places a burden on the courts but also creates uncertainty for trustees, who may struggle to administer trusts without clear guidance. For instance, in Re Baden’s Deed Trusts (No. 2), differing judicial opinions over the meaning of “dependants” highlighted how the test can lead to protracted disputes (Hayton, 2012). Such inconsistencies suggest that the balance between clarity and flexibility remains imperfect.
Additionally, the test’s leniency may undermine accountability. Under the list certainty test, trustees had a clear, albeit rigid, obligation to identify beneficiaries. With the modern test, there is a risk that poorly defined classes could allow trustees excessive discretion, potentially leading to mismanagement or unfair distribution. While courts can intervene to clarify terms, this reactive approach does not fully address the need for proactive doctrinal certainty (Hudson, 2015). Thus, while the test achieves flexibility, it does so at the cost of predictability and, to some extent, trustee accountability.
Conclusion
In conclusion, the ‘is or is not’ test introduced in McPhail v Doulton represents a significant shift in the law of express trusts, prioritising practical flexibility over the rigid clarity of the list certainty test. By focusing on conceptual certainty, it accommodates a wider range of trusts and upholds settlor intentions in complex scenarios, a clear advantage in modern trust law. However, this flexibility comes at the expense of doctrinal clarity, as the test’s reliance on judicial interpretation often results in ambiguity and litigation. The balance between these competing principles remains imperfect, as evidenced by ongoing challenges in defining class boundaries and ensuring trustee accountability. Moving forward, it may be necessary for courts to develop more consistent guidelines for applying the test, or for legislative intervention to clarify its scope. Ultimately, while the ‘is or is not’ test marks a progressive step, it has not fully reconciled the tensions between clarity and flexibility, leaving room for further refinement in trust law doctrine.
References
- Emery, C.T. (1982) The Most Hallowed Principle: Certainty of Beneficiaries of Trusts and Powers of Appointment. Law Quarterly Review, 98, 551-568.
- Hayton, D.J. (2012) Hayton and Mitchell: Text, Cases and Materials on the Law of Trusts and Equitable Remedies. 14th ed. London: Sweet & Maxwell.
- Hudson, A. (2015) Equity and Trusts. 8th ed. Abingdon: Routledge.
- Penner, J.E. (2016) The Law of Trusts. 10th ed. Oxford: Oxford University Press.
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